Inflazyme Pharmaceuticals Ltd.
NEX BOARD : IZP.H

Inflazyme Pharmaceuticals Ltd.

July 16, 2008 19:26 ET

Inflazyme Pharmaceuticals Ltd. Announces Financial Results for the Year Ended March 31, 2008

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 16, 2008) - Inflazyme Pharmaceuticals Ltd. (NEX:IZP.H) today reported its financial results for the year ended March 31, 2008.

Results of operations for the year ended March 31, 2008

The net loss for the year ended March 31, 2008 was $227,000 ($0.00 per common share) compared to a net loss of $15,384,000 ($0.13 per common share) for the prior year. The decrease in net loss is primarily due to the gains recognized during the year on the disposal of assets held for sale and deferred revenue as well as a reduction in the loss from operations for the year. The cumulative gains recognized during the year amounted to $4,216,000.

Loss from operations for the year ended March 31, 2008 was $4,592,000 compared to $15,752,000 for the prior year. This reduction in the loss from operations of approximately $11,160,000 reflects the termination of research and development activities during the current year, the write down of patents and licenses recognized in the prior year, the related reduction in amortization expense in the current year and lower restructuring charges in the current year.

Research and development

The Company discontinued substantially all of its research and development activities in February 2007, and for the year ended March 31, 2008, its only research activities during the year were related to the close down of its CAPSIC study during the first quarter.

During the year, the Company recognized a recovery of its research and development expenses of $77,000 related to a change in estimates during the year. In November 2007, the Company received its final invoices from third party contract research organizations related to the CAPSIC study, which was substantially completed in March 2007. The final invoices were less than the estimated accrued liabilities recognized for this study and, accordingly, the Company reduced the accrued liabilities in the current year to reflect the final invoice amounts. This change in the estimate reduced the accrued liabilities by $379,000 and was recorded as a reduction of the research and development expense, resulting in a recovery of research and development expenses of $77,000 for the year ended March 31, 2008.

In the prior year, research and development expenses were $8,801,000 which consisted of $5,592,000 for contract research, $1,806,000 in personnel expenses, and $1,403,000 in laboratory expenses.

General and administration

For the year ended March 31, 2008, general and administration expenses were $3,639,000 compared to $3,407,000 in the prior year. The increase of $232,000 was due to higher professional fees and overhead costs partially offset by lower personnel expenses.

Professional fees were $1,425,000 for the current year, an increase of $559,000 compared to the prior year. The increase reflects primarily patent related expenses of $484,000 included in general and administration expenses whereas in the prior year these expenses were either capitalized as patent and licenses or they were allocated to research and development. Overhead costs totalling approximately $249,000 were allocated to G&A, whereas in the prior year, these costs would have been allocated to R&D. Personnel expenses were $1,115,000 for the current year, a decrease of $718,000 from the prior year. The decrease resulted from the staff terminations that were effected in February 2007 and January 2008.

Restructuring charges

During the current year, the Company further reduced head count from five to two employees. Costs representing required severance and other employee separation costs for these three employees were $925,000. These amounts were paid in January 2008 when the terminations took effect and there are no amounts owing to these employees at March 31, 2008.

In the prior year, restructuring charges included severance and other employee separation expenses of $564,000 and a write-down of leasehold improvements of $756,000.

Amortization expenses

Amortization expenses were $137,000 for the year ended March 31, 2008 compared to $899,000 for the prior year, a decrease of $762,000. The amortization expense decreased primarily due to lower property, equipment and patent net asset base. No amortization was taken on the patents and licenses held for sale during the year in accordance with Canadian generally accepted accounting principles.

Interest Income

Interest revenue was $149,000 for the year ended March 31, 2008 compared to $363,000 in the prior year. The decrease of $214,000 was due primarily to lower cash and cash equivalent balances.

Gain on disposal of assets held for sale

During the year the Company disposed of assets classified as "assets held for sale" on its consolidated balance sheet at March 31, 2007. Included in "assets held for sale" were the carrying values of its research equipment, and patents and licenses related to its phosphodiesterase inhibitors.

The research equipment, which had a carrying value of $74,000, was sold for proceeds of $713,000 and a gain of $639,000 was recognized in the consolidated statements of operations and deficit related to this disposal.

On November 18, 2007, the Company completed the sale of its patents and licenses for $4 million upon closing of the transaction, and an additional $7 million is to be paid upon the successful achievement of certain milestones as follows: (i) $1.5 million upon a decision to enter a Phase 2b clinical study with a phosphodiesterase inhibitor; (ii) $2.5 million upon a decision to initiate a Phase 3 study with a phosphodiesterase inhibitor; and (iii) $3 million upon a decision to begin a Phase 3 clinical study with a Leukocyte Selective Anti-Inflammatory Drug (LSAID™). The purchaser will also pay a royalty of 1.25% of net sales on the first phosphodiesterase inhibitor commercialized. In addition to these amounts the Company is to receive up to 35% of the proceeds from the subsequent sale of its protein therapeutics technology if these assets are sold within 12 months of the transaction closing. There can be no assurance that the milestones, royalty and payments related to the sale of the protein technology will be achieved.

The Company reported a gain for the year of $3,326,000 related to this transaction. The gain reflects the $4 million in proceeds received at closing, net of expenses, less $606,000 the carrying value of the patents and licenses.

Also included in this gain were the proceeds of $40,000 from the sale of other patents that had a $nil carrying value. The total gain from the disposal of assets held for sale recognized in the consolidated statement of operations and deficit for the year ended March 31, 2008 was $4,005,000.

Gain on settlement of deferred licensing revenue

In January 2003, the Company granted a limited license to a compound from its library of phosphodiesterase 4 inhibitors in exchange for a non-refundable license fee of $383,000 and an option to participate equally in the development and commercialization of the compound beyond Phase 2a. The upfront fee was recorded as deferred licensing revenue and was being recognized as revenue over 10 years, the estimated expected period of the Company's involvement with the development of this compound. The option was exercisable up to 90 days after the completion of a Phase 2a study, by the Company paying one-half of the development costs incurred from the start of Phase 1.

In August 2007, the Company allowed the option to expire and will no longer be involved in the development of the compound. Accordingly, the deferred licensing revenue balance was reduced to $nil and a gain on settlement of deferred licensing revenue of $211,000 was recognized in the consolidated statement of operations and deficit for the year ended March 31, 2008.

Liquidity and Capital Resources

At March 31, 2008 the Company's cash and cash equivalents totalled $3,247,000 compared to $5,461,000 at March 31, 2007. Working capital at March 31, 2008 was $3,116,000 compared to $3,439,000 at March 31, 2007.

The Company used $6,900,000 to fund operations during the year ended March 31, 2008 compared with $10,115,000 for the prior year.

Cash from investing activities for the year ended March 31, 2008 was $4,686,000 compared to cash used in investing activities of $182,000 for the prior year. In the current year, the cash from investing activities relates to the net proceeds from the disposal of assets held for sale. This is compared to $182,000 used in the prior year for the maintenance and filing of patents.

On June 30, 2008, the Company closed, into escrow, a non-brokered private placement issuing 15,000,000 units for gross proceeds of $300,000. Each unit consisted of one common share and one warrant to purchase a common share for $0.025. The warrants expire one year from when the funds are released from escrow which is expected to occur on August 18, 2008, if the Company has received the required shareholder and regulatory approvals.

The Company believes its current cash resources are sufficient to fund the start-up of its proposed lumber trading activities. Such activities are subject to shareholder approval.

Annual General Meeting and Special Meeting of Shareholders

Inflazyme's AGM and Special Meeting will be held at 10.00am on August 18, 2008, at the Vancouver Marriott Pinnacle Downtown Hotel, 1128 Hastings Street, Vancouver, British Columbia, V6E 4R5, Canada. The purpose of the meeting is to vote on certain corporate matters outlined in our press release dated June 12, 2008. In addition, an Information Circular describing all the matters to be voted on by shareholders will be available in early August.

Statements in this news release other than historical information are forward-looking statements subject to risks and uncertainties. Actual results could differ materially depending on factors such as the availability of resources, the timing and effects of regulatory actions, the strength of competition, the outcome of litigation and the effectiveness of patent protection. Additional information regarding risks and uncertainties is set forth in the current Annual Information Form for Inflazyme on file with the Canadian Securities Commissions.



Inflazyme Pharmaceuticals Ltd.
Consolidated Balance Sheets
(Unaudited)
March 31, March 31,
2008 2007
-------------- --------------
Assets

Current assets
Cash and cash equivalents $ 3,247,098 $ 5,461,316
Accounts receivable 163,771 109,944
Assets held for sale - 680,760
Prepaid expenses 144,739 257,402
-------------- --------------

3,555,608 6,509,422

Property and equipment 39,498 176,833

-------------- --------------
$ 3,595,106 $ 6,686,255
-------------- --------------
-------------- --------------

Liabilities

Current liabilities
Accounts payable and accrued liabilities $ 439,524 $ 3,070,645

Deferred licensing revenue - 229,950
-------------- --------------
439,524 3,300,595
-------------- --------------

Shareholders' equity

Capital stock 141,212,889 141,212,889

Contributed surplus 2,201,298 2,204,392

Deficit (140,258,605) (140,031,621)
-------------- --------------
3,155,582 3,385,660

-------------- --------------
$ 3,595,106 $ 6,686,255
-------------- --------------
-------------- --------------

On behalf of the board

Michael Liggett (signed) Louis Drapeau (signed)
----------------------- ---------------------
CFO Director
Director


Inflazyme Pharmaceuticals Ltd.
Consolidated Statements of Operations and Deficit
(Unaudited)

For the Three Months Ended For the Year Ended
----------------------------------------------------------
March 31, March 31, March 31, March 31,
2008 2007 2008 2007
----------------------------------------------------------

Revenues
Licensing
revenue $ - $ 9,581 $ 31,642 $ 38,408
----------------------------------------------------------

Expenses

Research and
development - 1,703,270 (77,417) 8,801,042
General and
administration 771,309 631,370 3,639,320 3,406,633
Write-down of
patents and
licenses - 87,157 - 1,363,477
Restructuring
charges - 1,320,308 924,686 1,320,308
Amortization
of property,
equipment,
patents and
licenses 7,132 265,697 137,335 899,395
----------------------------------------------------------

778,441 4,007,802 4,623,924 15,790,855
----------------------------------------------------------

Loss from
operations (778,441) (3,998,221) (4,592,282) (15,752,447)
----------------------------------------------------------

Interest income 33,685 65,434 149,300 363,395

Gain on disposal
of assets
held for sale 40,000 - 4,005,210 -

Gain on sale of
fixed assets - - - 4,650

Gain on
settlement of
deferred
licensing
revenue - - 210,788 -

----------------------------------------------------------
Net and
comprehensive
income/(loss)
for the period (704,756) (3,932,787) (226,984) (15,384,402)

Deficit,
beginning of
period (139,553,849) (136,098,834) (140,031,621) (124,647,219)
----------------------------------------------------------

Deficit, end
of period $(140,258,605) $(140,031,621) $(140,258,605) $(140,031,621)
----------------------------------------------------------
----------------------------------------------------------

Basic and
diluted loss
per common
share $ (0.01) $ (0.03) $ (0.00) $ (0.13)
----------------------------------------------------------
----------------------------------------------------------

Weighted average
number of
common shares
outstanding 131,181,375 131,181,375 131,181,375 116,676,991
----------------------------------------------------------
----------------------------------------------------------


Inflazyme Pharmaceuticals Ltd.
Consolidated Statements of Cash Flows
(Unaudited)

For the Three Months Ended For the Year Ended
---------------------------- ----------------------------
March 31, March 31, March 31, March 31,
2008 2007 2008 2007
---------------------------- ----------------------------

Cash flows
from operating
activities
Income/(Loss)
for the period $ (704,756) $ (3,932,787) $ (226,984) $ (15,384,402)
Items not
affecting cash:
Amortization
of property,
equipment,
patents and
licenses 7,132 265,697 137,335 899,395
Gain on assets
held for sale (40,000) (4,005,210) -
Write down of
leasehold
improvements 756,565 756,565
Gain on sale of
fixed assets - - (4,650)
Gain on
settlement
of deferred
licensing
revenue - (210,788) -
Write-down of
patents and
licenses - 87,157 - 1,363,477
Deferred
licensing
revenue - (9,581) (19,162) (38,325)
Stock-based
compensation (21,474) (38,792) (3,094) 31,049
---------------------------- ----------------------------
(759,098) (2,871,741) (4,327,903) (12,376,891)

Changes in
non-cash
working capital (907,484) (606,281) (2,572,285) 2,261,999
---------------------------- ----------------------------
(1,666,582) (3,478,022) (6,900,188) (10,114,892)
---------------------------- ----------------------------

Cash flows from
financing
activities
Common shares
issued for cash - 2,461,708 - 2,461,708
Warrants issued
for cash - 538,282 - 538,282
Unit issue
costs - (50,417) - (50,417)
---------------------------- ----------------------------
- 2,949,573 - 2,949,573

Cash flows from
investing
activities
Purchase of
property and
equipment - - - (4,235)
Patents and
licenses - (32,270) - (182,867)
Proceeds from
disposal of
assets held
for sale 40,000 - 4,753,470 -
Selling
expenses on
disposal of
assets held
for sale - - (67,500) -
Proceeds from
sale of fixed
assets - - - 4,650
---------------------------- ----------------------------
40,000 (32,270) 4,685,970 (182,452)

---------------------------- ----------------------------
Increase/
(Decrease)
in cash
and cash
equivalents (1,626,582) (560,719) (2,214,218) (7,347,771)

Cash and cash
equivalents,
beginning of
period 4,873,680 6,022,035 5,461,316 12,809,087
---------------------------- ----------------------------

Cash and cash
equivalents,
end of period $ 3,247,098 $ 5,461,316 $ 3,247,098 $ 5,461,316
---------------------------- ----------------------------
---------------------------- ----------------------------

Supplemental
disclosure of
cash flow
information
Interest
received 38,509 80,686 149,300 355,323

Contact Information

  • Inflazyme Pharmaceuticals Ltd.
    Michael Liggett
    C.F.O.
    1-800-315-3660 or (604) 279-8511
    (604) 279-8711 (FAX)
    Website: www.inflazyme.com